The top of the security industry became a little less fragmented this morning, as Lawrence, Kan.-based Protection One Inc., the third-ranking company on the 2009 SDM 100 list of largest, U.S.-based security dealers, announced that it will be acquired by an affiliate of GTCR, a Chicago-based private equity firm that manages more than $8 billion in equity capital. Speculation about the sale of Protection One has been wide since the beginning of the year, when the dealer made public its intent of searching for a buyer, and it follows the acquisition in January of Broadview/Brinks Home Security, the number two company on the SDM 100, by number one ADT.

 

Protection One’s board of directors unanimously approved the transaction, which is subject to customary closing conditions, including minimum levels of participation in the tender offer and regulatory approvals. The transaction is expected to be completed in the second quarter of this year and, upon completion, will make Protection One a private company, wholly owned by the GTCR affiliate.

 

"Our board of directors has determined that the proposed price for the transaction is fair to Protection One’s stockholders,” said Richard Ginsburg, chief executive officer of Protection One. “We also expect that the tender offer will deliver value to Protection One’s stockholders in a more efficient and more immediate fashion than under a traditional merger process.”

 

Under the terms of the agreement, an affiliate of GTCR will commence on or about May 3, a tender offer to acquire all of the outstanding common stock of Protection One for $15.50 per share in cash, followed by a merger to acquire all remaining outstanding Protection One shares at that price. The offer price represents a premium of 13% over the April 23 closing stock price of $13.76, and a premium of 118% over the $7.10 closing stock price on Jan. 19, the last business day prior to Protection One’s public announcement that it was considering a possible sale of the company. The total purchase price, including the refinancing of Protection One’s debt, will be approximately $828 million.

 

“We look forward to building on the strong base of business established by Protection One’s top-quality team of employees, while continuing to provide great service to Protection One’s customers,” commented David Donnini, principal of GTCR.

 

Affiliates of Quadrangle Group LLC and Monarch Capital Partners, which together own more than 60% of the fully diluted shares — and approximately 70% of the currently outstanding shares — of Protection One, have each executed a tender and support agreement pursuant to which they have agreed to validly tender their shares in the tender offer.

 

Protection One’s financial advisor in the transaction is J.P. Morgan Securities Inc. and its legal advisor is Kirkland & Ellis LLP. Lazard Freres & Co. LLC advised Protection One’s board of directors and its independent transactions committee with respect to the fairness of the offer price to be paid in the transaction.

 

Morgan Keegan & Company Inc. and Barclays Capital served as M&A advisors, and Barnes Associates served as an industry advisor to GTCR. Latham & Watkins LLP and Skadden, Arps, Slate, Meagher & Flom LLP provided GTCR legal counsel.